Lexus Faces Difficult Challenges in China

Posted by Kevin on July 22nd, 2013

Bloomberg has an article investigating the difficulties Lexus faces in China:

When shopping last year for his first car, Will Zhang considered a Lexus CT200h and a BMW 320i. Though he preferred the Lexus, he went with the BMW because at 340,000 yuan($55,400) it was 18 percent cheaper.

While the Lexus lists for about $600 less than the BMW in the U.S., in China it’s $13,000 more because the German automaker produces its cars in the country, whereas made-in-Japan Lexus faces a 25 percent tariff.

While the design of Lexus vehicles has become much bolder, the company remains conservative in China, despite being the fourth largest luxury automotive brand behind Audi, BMW & Mercedes.

Brands like Infiniti (12,000 sales in 2012) & Acura (less than 3,000 sales in 2012) are taking huge financial risks building factories in China, despite selling a fraction of what Lexus’ sales volume (60,000 sales in 2012).

So what is Lexus waiting for?

Toyota may start producing Lexus cars in China in 2015 or 2016, when annual sales will likely reach about 100,000 units, according to Kota Yuzawa, an auto analyst with Goldman Sachs Group Inc. in Tokyo. A single model typically needs to sell 30,000 to 40,000 units a year for local production to make economic sense, he said.

If Lexus does decide to start manufacturing vehicles in China, it will likely start with the ES — exact sales figures are unavailable, but last year Lexus estimated sales of that model to be 3,000 per month.

Read the Bloomberg article on Lexus in China

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    BlackDynamiteOnline
  • July 22, 2013
Lexus' tortoise-like approach to China extends to their manufacturing as well. BD
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    Aries_Gao
  • July 23, 2013
Actually, lexus brand is famous for his high quality product in china since it's totally manufactured in JAPAN and imported into china , via the imported channel, it will also bring the higher profit for one car. But on other hand, it makes the higher sales price than his German rivals such as bmw mercedes and Audi despite lexus offer the 4 years long free warranty and maintenance (6 years for Hybrid model) which result in the much less sales amount comparing the German rivals. Besides this, the product of lexus is less competitive than BBA, lexus has less categories of car to choose and most of which with the big displacement NA engine are not as popular as turbo engines for customer in china. It's really a problem for lexus leader ship to decide whether they will set up factory in china and expand localization as other german manufactures, but it seems to be a unstoppable trend and unique choice to keep sales amount grow up year by year in future, if so, as LEXUS vehicle's owner in china I'm really worried if those cars which made in china also have the same high quality and reliability as before made in JAPAN even it will be much less expensive than before or get more optional configuration. I think most of lexus owners or potential buyer are more concerned about the quality which only can be get via importing from oversea rather than its lower base price via the low-cost localized manufacture and imported car can also make owners more special and different from others who drive german cars.

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